Canada’s Student Loan “Crisis” Is Overstated

Last week, The Globe and Mail’s resident troll Margaret Wente penned an opinion piece called The Myth Of Crushing Student Loan Debt. As you can imagine, quite a few people read the headline, got angry, and filled the Globe’s comment section with their fun internet outrage.

The crux of her argument is that, compared to students a decade or two ago, today’s post secondary graduate has it a lot better. Tuition continues to increase, but not nearly at the rate it did during the 1990s. Because of this, student loan growth is muted. Low interest rates have made this debt more affordable than ever to service. Governments give billions of dollars to students and their parents in the form of tuition tax credits, and that’s not even counting certain provincial programs that reward graduates for sticking around a certain number of years. Even scholarships are plentiful.

Of course, most people with student loan debt would disagree. Things are tough when you’ve got five figures of debt to pay off, especially when you’re starting at some job that isn’t quite as glamorous as your guidance counselor promised. Often you’ll have to move to a new city or something, plus you’ll be excited to be making a nice steady salary for the first time in, uh, ever.

Put all this together, and we’ve got a bunch of new graduates with problems that are a big deal in their own minds.

The reality of higher education is that some people will have to borrow money to make it happen. If done properly, this investment will pay for itself 20 or 30 times over. If done improperly, it can leave a graduate with a crippling debt load. This is most of the reason why I argued that tuition should be higher for degrees without the earning potential.

This has been the reality since the invention of student loans in 1789 by the corpse of Napoleon. Don’t bother looking that up. It’s wrong. FINALLY, AN ODD HISTORICAL REFERENCE AT FINANCIAL UPROAR.

Look, the reality is that student loans are just a form of leverage. Some people are lucky enough to hit up their parents to pay for it. Other people work hard and get scholarships, and enjoy a education that doesn’t come attached with a whole bunch of debt. According to Wente, about half of graduates without any loans at all. A lot of the time, leverage works. Sometimes it doesn’t. But it still needs to be paid back.

Life is good for a recent graduate without any debt. They’ve got a fancy new degree, a well paying job, and all sorts of disposable income. Someone in their early to mid-20s can have a lot of fun with that set of circumstances. And so most folks do. Some take the opportunity to save their hineys off, but they’re in the minority.

The half of graduates with debt see their peers driving new cars, living in swanky downtown apartments, and dining on raw fish for some reason. They’re more jealous than the rest of the internet is of my awesome #jokes. By this point living like a college student has lost any appeal, so they start to loosen the purse strings.

And so, student loan debt payoff gets delayed.

Is this really such an issue? Recent graduates don’t have a student loan problem, they have an expectation problem. For every college graduate that shares living expenses with someone else, there are ten that think they deserve their own apartment in the middle of downtown, even though they have five figures of debt. How many recent graduates do you know that consistently make smart financial decisions?

It’s never been a better time to owe student loans. Tuition isn’t growing nearly as much as you think. Low interest loans rates make payments affordable. Even taxes are set up to make life pleasant for a new graduate. I can’t believe I’m saying this, but Margaret Wente is right. The student loan “crisis” is overstated.

4 Comments

Student loan debt is definitely a big thing on most graduate’s minds; however, I think learning how to manage this debt is actually really useful. Although its a big deal coming straight out of school, there will be other big debts down the road. Its important for people to learn how to manage these sorts of burdens.

I never understood people who take out large loans and then get angry when the piper comes calling. That’s the deal, right? Crying because you have to hold up your end of an agreement is like being a silly child who asked for 10 more minutes of TV before bedtime, it was given to them, and then they throw a tantrum anyway.

Kinda agree, kinda don’t. The “crisis” still seems to exist for many – just the reason for said crisis is different. The problem, which you pointed out, is that kids with no financial knowledge are given large loans to get this education. Smart kids will live frugally, like students, drink cheap beer, live in crappy townhouses with 7 room-mates and own a bike. They will graduate with a useful degree and a smallish loan, as that is all they needed to get by. They will pay that off quickly and life is good. Too many others will not be smart, spend way more of the “free money” on a lifestyle they can’t afford, take 5 years to get a 4 year degree which is useless, and then realize they have a massive loan and no job. That is still a crisis. Just like any form of leverage, it can be great if used responsibly, and devastating if mishandled. The problem is we expect dumb 17-21 year kids with no knowledge or experience of finances to figure this out, when chances are high the parents of these same kids are over-mortgaged and own a bunch of credit card debt and LOC as well. The gov’t should make any kid who gets a loan take an 8 week summer school class in financial responsibility – if you don’t pass you don’t get your loan. At least then we tried to help them.

I think studying how to handle this financial debt is actually really useful. Although its a big cope arriving directly out of university, there will be other big financial obligations in the future. Its important for people to understand how to handle these kinds of problems. Thanks for sharing.